Smartlinx3 asks for more
Four years after it claimed it would soon be self-sufficient, city council-backed broadband company Smartlinx3 (SLX3) has again asked shareholders for a capital injection – this time to pay off its $500,000 loan from the failed South Canterbury Finance, which is nearing its final extension due date.
The private company started six years ago to bring fibre to homes in Porirua and the Hutt Valley, has received about $5 million in funding from the Hutt City, Upper Hutt City and Porirua City councils, the Hutt Mana Charitable Trust and central Government.
SLX3 is already technically in default on the loan, but with ‘‘letters of comfort’’ from some of its four public backers, South Canterbury Finance gave it an extension. South Canterbury Finance’s receivers also continued the loan.
Alternatively, the company suggests the councils take over the servicing of the debt.
The last injection of council money was in March of this year, when the three councils came up with $90,000 each for additional shares.
There have been two additional share offers since then, but it is not known who may have subscribed to them, or for how much. There do not appear to have been any more capital injections from the four public shareholders.
The latest revelation comes after the resignation of company director Leo Austin, a representative of investor Hutt Mana Charitable Trust (HMCT).
Mr Austin, appointed only a year ago by HMCT, with $825,000 investment in shares that are now worth much less than that, would not give his reason for resigning.
He said there were ‘‘some matters’’ the shareholders had to sort out. As of the Kapi-Mana News deadline, no replacement had been appointed.
The March share offer councils bought was contingent upon SLX3 reaching a total share offer result of $320,000.
It is not known whether that was achieved.
By mid-2010, SLX3 was so reduced in income that it laid off all its staff and contracted its operations to Wellington pioneer broadband company CityLink.
It is out of the running for the Government’s Ultra Fast Broadband Initiative, though it may receive some income from a deal with CityLink’s owner TeamTalk, to share its installed fibre base for the project.
The three councils continue to keep almost all details of SLX3’s dealings with them secret.
The resignation of Mr Austin may have precipitated a crisis of control over the company, which needs a board of three directors to function, according to Hutt City chief executive Tony Stallinger.
Claims by Hutt City councillor Max Shierlaw that the Local Government Act makes SLX3 a council-controlled organisation because of Mr Austin’s departure were refuted by Mr Stallinger on legal advice. The matter is with the audit office.
An attempt to table a motion at Hutt City Council’s finance and audit committee on October 5 to confirm that SLX3 should be treated as a CCO, was rejected by officers and the committee chair.